RUAG looks back on a challenging business year

Net sales of CHF 741 million (previous year: CHF 681 million, +5.3%) and an incoming orders figure of CHF 820 million (previous year: CHF 701 million) contrast with an EBIT of CHF 22 million (previous year: CHF 15 million) and an EBIT margin of 2.9% (previous year: 2.1%).

In the year under review, RUAG MRO Holding Ltd was confronted with negative events from the past as well as more recent developments. In addition to the change of CEO, the decision of the Federal Council not to approve the sale of 96 non-operational Leopard 1 main battle tanks owned by RUAG had a significant impact on the public and within the company. As a result, the deal was not concluded. It is absolutely crucial for RUAG that all business activities for which the company assumes responsibility are carried out transparently and consistently compliant with the law as well as the owner’s requirements. In the case of the Leopard 1 main battle tanks, we are dealing with a legacy issue from 2016, which is being reviewed in several investigations. The tanks were purchased by the former RUAG Defence, a division of the old RUAG, which has since been unbundled. Since not all the facts in the relevant contracts were fully transparent for us either, both the Swiss Federal Audit Office (SFAO) and RUAG itself initiated investigations. The SFAO published the result of their investigation in February 2024.

Financially sufficient for 2023 annual budget

The Business Area Ground improved its operational results significantly, but had to make provisions of CHF 12 million due to possible additional charges from old contracts. The Business Area Air, however, was not able to achieve the budgeted results because the Armed Forces placed less orders and RUAG was unable to deliver the desired capacities in full for certain service elements. RUAG Real Estate Ltd’s result is positive, despite the considerable backlog of investments. The sale of part of the Stans site to Pilatus Aircraft Ltd is beneficial for both companies and strengthens the location for the aviation industry.

The EBIT margin of around 3% is not yet satisfactory and does not provide RUAG with a long-term, sustainable financial basis for its further development. Moreover, it is evident that the scarce capital resources allocated to the company at the time of the unbundling are not sufficient to overcome the inherited issues and at the same time pre-finance both the investments necessary for securing RUAG’s future and replacing the systems of the Swiss Armed Forces.

Strategically on course

Nevertheless, RUAG was able to achieve numerous business-relevant successes, which helped to consolidate the company’s position as a comprehensive security company.

The extensive preparations and ultimately the conclusion of the multi-year service level agreement for the period 2024‒2027 with the Armed Forces Logistics Organisation demonstrate trust and transparent cooperation. The agreement guarantees the Armed Forces a high level of availability for 130 systems. Another important milestone was the successful conclusion of the three-year Cervino program (e2e process redesign and SAP S/4HANA migration), which went live on 1 January 2024. With this program, RUAG is harmonizing its inherited disparate process landscape in a comprehensive system environment. This enables significantly better control of efficiency and availability and therefore contributes to the operational performance of the Armed Forces.

In addition, the RUAG Innovation Organization (RIO) has established itself in the Swiss security innovation ecosystem in close coordination with armasuisse S+T and the Swiss Innovation Forces. In the cyber security business, RUAG was able to conclude the acquisition of CyOne Security Ltd in close coordination with the owner and the Armed Forces. CyOne Security Ltd is a core element of the Confederation’s secure communication, also outside the Armed Forces, and is one of the leading companies in cryptography in Switzerland.

The Artemis project, a contract to recondition and modernize F-5 jets for the United States Navy, proves that RUAG’s expertise and capabilities are competitive and highly valued internationally.

Focus on sustainable expertise

RUAG demonstrates its security policy relevance and makes a significant contribution to the sovereign security of Switzerland. To ensure that it can continue to fulfill this mission, which will remain a priority in the future, RUAG is focusing on sustainable expertise and motivated as well as competent employees. Thanks to its high-quality training of specialists, RUAG ranks among the best training companies in the country. In 2023, a total of 60 apprentices in 13 professions completed their training at RUAG. Four of these apprentices won medals at the national vocational championships.

2024 will be a year of focus. The aim is to stabilize leadership, embrace the new process and system landscapes and continue to consistently and reliably deliver the required performance and thus financial results. In 2024, the global political situation and the learning curve in connection with the SAP S/4HANA migration will present a challenging environment for securing the supply chain and thus the availability of military systems.

For more information on RUAG, please contact Kirsten Hammerich, Senior Media Relations Manager, Kirsten.Hammerich@ruag.ch / Phone +41 58 467 05 11