OHB satellite business doing well, rocket division less so; multiple ESA ITTs stress Europe’s supply chain
Credit: OHB SE
LUXEMBOURG — Satellite and rocket hardware builder OHB SE reported increased revenue and profit for the nine months ending Sept. 30 despite headwinds as its Ariane rocket division manages the rough transition from the Ariane 5 to the Ariane 6 rocket.
It is a problem that is not going away as Ariane 5 heads toward retirement and its replacement, the lower-cost Ariane 6, enters an uncertain market. Its inaugural flight is scheduled for late 2020.
OHB, through its Aerospace and Industrial Products division, has an 11% share of the Ariane 6 work.
“We are on schedule and on budget,” OHB Chief Executive Marco R. Fuchs said of the company’s Ariane 6 contracts. “The overall market is something that [European launch-service provider] Arianespace is working on. Of course it’s very competitive. There is price pressure, and new players.
“Ariane 6 has to prove that it is as good as we all hope it will be. As a supplier, noting has changed. Our contractual agreements are the same as negotiated some time ago. We are hopeful that the ramp up on the market happens as planned, but as a supplier we are really not in control of that.”
Arianespace has ordered the first batch of 14 Ariane 6 vehicles from prime contractor ArianeGroup, which is OHB’s customer.
Because it is unclear what the market’s response to it will be — particularly given the tumult in the traditional geostationary-orbit satellite sector — Ariane 6 is being ordered more slowly than what contractors like OHB had hoped. That, plus Ariane 6’s lower-cost design, is making the transition from Ariane 5 more difficult for its manufacturers.
OHB’s satellite business, based on European government programs, is doing well. But the Aerospace and Industrial Products division is where the work on the Ariane rocket work is done. The transition from Ariane 5 to Ariane 6 was never going to be easy. How difficult it will turn out to be won’t be known for another year or two. Credit: OHB SE
“We have significant volume decreases,” Fuchs said of the transition’s effect on MT Aerospace, the division that does the work. “We had something like 11,000 production hours on a shipset of Ariane 5. Now we have 7,000 production hours on Ariane 6.”
OHB SE as a whole reported an EBITDA of 8.8% of revenue, which was up 3.9%, to 659 million euros ($735 million), for the nine months ending Sept. 30.
The Aerospace and Industrial Products division, which includes Ariane rocket component builder MT Aerospace, reported a 7% drop in revenue, to 130.8 million euros and an EBITDA margin of 9.6%, down from 11.1% last year.
“The goal is to make MT less dependent on the Ariane business,” Fuchs said. “It used to be a very high percentage — two thirds. Soon we will have one-third. This is part of the healthy evolution of MT Aerospace.”
OHB’s current largest programs are as prime contractor for Europe’s Galileo positioning, navigation and timing satellites; prime contractor for the six-satellite Meteosat Third Generation meteorological spacecraft; and prime for the three-satellite SARah radar reconnaissance mission for the German military. Airbus Defence and Space is building one of the three SARah satellites.
OHB, and the entire European space-hardware sector, is looking to the Nov. 27-28 conference of European Space Agency (ESA) governments to approve multiple new programs. OHB will be bidding either as prime contractor or as part of a team.
Multiple ESA bid requests putting stress on supply chain
Like the other two European space system prime contractors, Airbus Defence and Space and Thales Alenia Space, OHB is struggling to manage as many as 10 simultaneous invitations to tender from the 22-nation ESA.
The competitions, for Earth observation and exploration programs, have put strains on Europe’s space-contracting ecosystem. It’s particularly difficult for smaller companies, insofar as the ESA tenders require them to deliver priced bids to the prime contractors, which then include them in their bids.
Industry officials said they have never seen so many bid requests coming at the same time.
A small- or medium-size subcontractor will be hard-pressed to handle the wave of bids now facing deadlines. Officials from Airbus, OHB and Thales Alenia Space said it’s not the programs’ production schedule that is the problem — the actual development is stretched out — but the densely packed deadlines for the bids.
Some of these contractors are the sole European suppliers of a given piece of equipment.
Rocket Factory Augsburg AG: OHB’s small-launcher pitch
OHB is a family-owned company. The Fuchs Family Pool has 69.72% of the equity, which gives it the luxury of investing in what might be considered risky ventures without much shareholder blowback.
So it is with Rocket Factory Augsburg AG (RFA), OHB’s small-satellite launcher initiative. Established in 2018, the company now has more than 50 employees designing a rocket to carry a 200-kilogram payload into low Earth orbit. The company is among those bidding for selection by the government of Portugal to operate from the Azores.
“Initial tests of major subsystems have already been successfully completed,” OHB said in a statement to investors. “To market the rocket, RFA can also draw on the resources of the OHB Group, which in OHB Cosmos has a company specializing in this area. Given the expected rise in demand for the transportation of small payloads, the future market prospects for a mini launcher are positive, especially as the OHB Group itself develops and builds such small satellites at several locations.”
Fuchs explained the venture this way:
“We believe in the market for micro launchers. We have our own assessment of the demand. We have always been a space company, not a satellite company.”