Letter to the Shareholder

From Aerospace to Space: RUAG International on its way to a Successful future in space....

Dear Shareholders,
Dear Customers,
Dear Readers,

We are pleased that we were able to realize all the milestones for RUAG International in 2023 as promised with the divestments of the non-space-related business segments. In many cases, we even significantly exceeded the targets we had set for our employees. For example, a very attractive succession solution was found for the aerostructures business in Germany and Hungary with Mubea. And at the Emmen site, Pilatus Flugzeugwerke, a longstanding partner and customer, is taking over all machinery and employees. 

The transformation of Beyond Gravity into a commercially successful and digitalized space company in all business areas is progressing according to plan. New digital platforms, expanded production facilities and modern hybrid office workstations are laying the foundations for end-to-end networked, automated business processes and for the integration of AI (artificial intelligence) and AR (augmented reality) into products and workflows.

Robust growth despite global inflation

In 2023, despite challenges from inflation and supply chain issues, the space market experienced robust growth, driven by increasing commercial investment and technological advances. Demand for satellite launches and space missions rose sharply and private companies once again played a significant role. However, economic factors, such as global financial market volatility and geopolitical tensions, led to increased costs and delays in projects. 

The supplier market for aircraft components also faced inflationary pressure and supply chain disruptions, but still managed to record slight growth due to the recovery in demand in the aviation sector.

Due to the extensive company divestments in 2023 and 2022 (e.g. RUAG Ammotec), the key figures are only comparable to a limited extent. However, they reflect the continuous progress of the divestment strategy adopted jointly with the owner, the Swiss Confederation. Accordingly, the number of employees worldwide fell from 2,963 to 1,989. Net sales, 96% of which came from civil activities, fell to CHF 620 million (previous year CHF 945 million), EBIT to CHF 28 million (CHF 187 million) and free cash flow to CHF 89 million (previous year CHF 472 million). Adjusted for the divestment and currency effects, net sales rose by CHF 62 million compared to the previous year. 

The income from the divestments and property sales will make it possible to pay a reasonable dividend to the owner for the 2023 financial year, as in the previous year.

New orders and successful major projects

Amongst the most important new orders, 14 payload fairings for the new European launcher Ariane 6 stand out. In addition, there are landmark contracts with new space players such as Quantum Space, Rocket Lab and Loft Orbital. Beyond Gravity will supply constellation on-board computers (COBC) and antennas for communication in the microwave spectrum for their innovative technology platforms and services. On another positive note stands the order intake in the area of drive mechanisms for solar modules (SADM) and slip rings production in Nyon grew favorably.

The major projects won in the previous reporting period for Amazon’s Kuiper satellite constellation in the area of satellite dispensers and for the new launch platforms Vulcan Centaur (USA), Ariane 6 (Europe) and H3 (Japan) will generate order volumes for years to come. The maiden flight of all three new launch vehicles is planned for 2024.

Business with technologies for the semiconductor industry also developed successfully in 2023. The apertures and high-precision actuators for laser optics enable hardware manufacturers to achieve the precision required to produce the next generation of computer processors.

Attractive follow-up solutions for aerostructures

We initiated attractive follow-up solutions for all areas of aerostructures in 2023. The Airbus business in Oberpfaffenhofen (Germany) and Eger (Hungary) was taken over by the German family-owned company Mubea at the end of December 2023. The company, which has 14,000 employees and specializes in lightweight construction technologies, is taking over the business and the approximately 1,000 employees at both sites. 

Sales negotiations for the RUAG Aerostructures site in Emmen were also finalized at the beginning of 2024. Pilatus Flugzeugwerke AG – a longstanding partner and customer – will ensure further development and gradually take over all of RUAG Aerostructures Switzerland Ltd’s approximately 230 employees and all machinery. 

In 2023, RUAG International thus succeeded in finding follow-up solutions for all areas of aerostructures that fulfil the strategic requirements of the owner, the Swiss Confederation, while also guaranteeing attractive future opportunities for employees and continuity for customers. The strategy of first investing in a transformation in each business area in order to put the entire business on a sustainable basis and position it as a valuable company in the market has proven to be effective. The first part of Beyond Gravity’s privatization process in 2023 also involved the partial sale of the company premises in Zurich-Seebach. They were sold to the City of Zurich for CHF 140 million and will be leased back in their entirety by Beyond Gravity until at least 2030.

Investing in the future of Beyond Gravity

The remaining segment, Beyond Gravity, continues to focus on the space market and technology for the semiconductor industry. The spotlight is on activities that help to make the lives of people all over the world better and easier. In order to achieve the goal of a successful privatization by 2025 at the latest, Beyond Gravity is pursuing the same strategy that ensured the success of RUAG International’s divestments: First, all divisions will be made fit for the future so that an attractive solution can then be found for investors, customers and employees. 

The investments made in the expansion and modernization of production capacities in 2023 are particularly important for the future viability of Beyond Gravity. The foundations for new production halls and facilities were laid in 2023 at the US site in Decatur and in Linkoping, Sweden (see pages 18–19). From 2024, they will provide the capacity increases required to handle the order volume for Amazon’s Kuiper satellite constellation and for further growth in the New Space segment. The digitalized and largely automated processes will massively reduce production times. 

At the same time, Beyond Gravity is investing in modern hybrid office infrastructures to improve the efficiency of development and back office processes as well as collaboration across national and business unit boundaries.

Positive outlook on a solid foundation

Both the institutional and private space markets are likely to continue to grow strongly in the coming years. Innovative technologies and concepts such as reusable launchers and small satellites are continuously reducing costs. In addition, the trend towards large satellite constellations is leading to an industrialization of production processes and thus to further cost savings. Earth observation and satellite communication are thus becoming financially rewarding business instruments for more and more industries.

With the commissioning of the new production capacities in Decatur and Linkoping and the gradual rollout of EZYone from 2024, Beyond Gravity will have a powerful basis to benefit from the expected growth in the industry. Beyond Gravity is aiming for a positive operating result in all three divisions in 2024. 

The company’s focus remains on the transformation of all divisions into digitally networked and economically viable units. We would like to thank our owner and our customers for their trust, which has enabled us to successfully place the divested business units on the market. We would also like to thank our employees for the great commitment with which they made the transformation a reality. Together with all of you, we look forward to ascending into the next economic orbit with Beyond Gravity. The sky is never the limit!

Standardized digital core for greater efficiency

We initiated the company-wide EZYone transformation project for the end-to-end digitalization of development, production and back office back in 2022 and pushed it ahead in 2023. EZYone standardizes processes, cleans up data and implements new, uniform IT platforms. This will make the company’s digital core accessible worldwide in a flexible, cloud-based way. The standardization on a single platform will enable, among other things, the integration of all engineering processes from the initial idea through to design, production, supply chain management and quality control. In addition, there will be considerable savings in the maintenance and operation of only four instead of 22 solutions. (See also pages 20–23.)

Innovation & Digital Hub in Lisbon

The Innovation & Digital Hub in the Portuguese capital Lisbon, which opened in autumn 2023 and currently has around 60 employees, is to be expanded into a hub for around 200 digitalization and engineering specialists by 2025. They are already working closely with their colleagues at other locations to develop innovative solutions.

Strengthening the management team

As Chief Transformation & Strategy Officer, Caroline Schmitt has been providing the necessary impetus for Beyond Gravity’s digital transformation since May 2023. She has more than 20 years’ experience in the implementation of company-wide digitalization projects in a wide range of industries and is also a member of the Executive Board. She took over her role from Oliver Grassman, who has taken over the management of the Satellites division from Anders Linder, who has left the company. Laura-Kathrin Seitz joined the Beyond Gravity leadership team as Chief People Officer at the beginning of the year. She can look back on three decades in various HR management positions and brings a wealth of expertise in connection with growth, consolidation and transformation. 

At the end of the year, the management team will therefore consist of Andre Wall (CEO), Paul Horstink (EVP Launchers Division), Oliver Grassmann (EVP Satellites Division), Oliver Kunz (EVP Lithography Division), Angelo Quabba (CFO), Caroline Schmitt (Chief Transformation & Strategy Officer) and Laura-Katrin Seitz (Chief People Officer).

Leading the way in responsibility

Beyond Gravity doesn’t just want to help preserve the earth and make it a better place to live with its products and services. Sustainability is also becoming a central pillar of all company activities. A Group-wide ESG (Environmental, Social and Governance) initiative was launched in 2022. In 2024, Beyond Gravity will publish the first sustainability report for the year and will provide information on the current status, ongoing activities and the goals that have been set. The bar has been deliberately set high: The aim is to achieve “net zero” greenhouse gas emissions as early as 2026. (See pages 26–31). 

We are convinced that it is important to take responsibility, and that responsible behavior is also rewarded in many ways. Efficient use of resources reduces costs and drives innovation. A responsible company also attracts highly qualified specialists who want to see their personal values realised in their professional lives. ESG standards are also becoming increasingly important in the space industry and are often a decisive factor in project tenders.

RUAG International Holding Ltd.

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

sig. André Wall
CEO RUAG International and Beyond Gravity