COPENHAGEN — With many large and midsize European suppliers suffering as their governments cut military spending, Terma plans to consolidate its position as the Danish defense market’s biggest player by ramping up international growth through strategic partnerships.
The aerospace, security and defense group continued to grow in 2010-11, with income rising to $247 million compared with $194 million the previous year. Terma earned 90 percent of its 2010-11 revenues from exports.
The company’s partnership strategy was evident May 8 when Terma broadened its 2010 memorandum of understanding (MoU) with U.S.-based Sikorsky Aircraft to include additional potential collaborations on aircraft programs. The expanded scale of cooperation is tied to the Danish military’s multimission combat helicopter procurement process.
In January, Denmark’s Ministry of Defense short-listed Sikorsky’s MH-60 Seahawk and AgustaWestland’s AW159 Wildcat as the candidates to replace the Navy’s British-built Lynx helos. A final decision is expected by year’s end.
“We see a significant match between Sikorsky Aircraft as a helicopter manufacturer and Terma as a niche-oriented high-tech company with a very focused international strategy,” said Jørn Henrik Levy Rasmussen, vice president of Terma Global, the company’s international marketing and partnership development arm.
Other potential opportunities for working together include composites and electrical component manufacturing, as well as the use of Terma’s survivability equipment on a number of Sikorsky helicopters, including Black Hawks, said Robert Kokorda, vice president of Stratford, Conn.-based Sikorsky.
“Both of our companies are customer- and innovation-focused, which creates a solid foundation for collaboration,” Kokorda said.
The high-grade technical content in Terma’s niche offerings, together with its pivotal position in the Danish defense industry, are proving an attractive combination for new partners and real contracts, Berlin industry analyst Peter Linge said.
“Terma already has working partnerships with leading global industry heavyweights like Lockheed and is talking cooperation with others such as Austal,” Linge said. “I believe that the company’s star will continue to rise, but it has the potential to accelerate quickly if and when the Danish government returns to the fighter replacement program. The spinoff contract work for Terma can be very significant in this situation.” Terma’s specialization, and its technology-driven off-the-shelf solutions that target niche defense market segments, underpin the company’s growth strategy, Rasmussen said.
“We are very niche-orientated as a company. We know our core domain and what we are really good at,” he said. “We have a best-in-class strategy, and this is all about being among the top players in the niches we are working in, including radars, command-and-control systems, self-protection, advanced composites for fighters and helicopters, and 3-D audio.” Terma’s fast-paced growth in command-and-control systems continues to be an important source of revenue. In April, Terma completed the first major Aircraft Survivability Suite software update modification on Boeing CH-47F Chinooks for the Canadian Defence Forces’ medium-to-heavy lift helicopter (MHLH).
Boeing contracted Terma North America in 2009 to deliver a strengthened configuration of the ALQ-213(V) electronic warfare management system with dual cockpit displays for the MHLH, which is an advanced variant of the CH-47F.
Terma’s ALQ-213 controller is operational on more than 2,000 rotary and fixed-wing frontline combat aircraft systems, including the U.S. Air Force’s F-16s and A-10s, the U.S. Navy P-8A and special mission aircraft.
“Long-term partnership is a key word for Terma, as we always focus on creating lasting relationships with original equipment manufacturers, sub-suppliers and key partners in emerging markets,” Rasmussen said.
Major domestic procurement programs, such as the combat helicopter and the delayed plan to acquire a new multirole fighter aircraft, have also opened new doors for contracts and partnerships with leading defense market players, Rasmussen said.
This improved environment for cooperation was highlighted in April when Terma secured a contract from Lockheed Martin to provide the Terma AN/ALQ-213A Defensive Aids Controller (DAC) for the installation of a missile warning system on the C-130J Super Hercules.
The mission-critical ALQ-213A DAC has improved survivability and advanced capabilities such as data recording, embedded cockpit-crew training and better threat response processing capabilities.
Terma has also strengthened its domestic-production capacity through long-term relationships covering sub-contract component supplies and joint export-led international cooperation with other leading Danish defense companies: Systematic, Kvisgaard and the radar defense and aerospace company Weibel.
“The MoU with Sikorsky Aircraft holds great potential for the international market, and it will also benefit Kvisgaard, who supplies the cockpit display cabinets to the electronic warfare and aircraft self-protection systems we sell,” Rasmussen said. “We could do this work in house, but it is not a core skill area for us. It makes better sense to focus on what we are best at.” Terma has responded to Europe’s economic crisis and reduced defense spending, including at home in Denmark, by focusing more on selling to emerging markets.
“We will see growth especially in new regions and markets such as the Far East and Asia,” Rasmussen said. “To do this in a smart way, we must first decide what segments in these markets we wish to grow in. Despite the financial crisis and the present state of the market, we feel we can more than offset the decline we are seeing in Europe by raising sales to the new emerging regions. We will grow, even in this climate.” Terma’s ability to access new export markets has improved under a new Danish MoD program that supports local defense firms’international marketing activities. The program creates collaborative loops between companies and the trade and defense attachés in Denmark’s global network of embassies.
The Danish military’s involvement in high-profile operations, including Libya and Afghanistan, also helps Terma.
“Realizing greater sales will not be easy, but we are well positioned to do so,” Rasmussen said. “Denmark ... participates in international military operations, so our products are combat-tested and proven. The Danish Air Force’s F-16s sent to Libya were fitted with Terma’s self-protection and 3-D audio systems. Working with the Danish armed forces helps us to reach the global market with more confidence.”
Headquarters: Lystrup, Denmark
2010-11 sales: $247 million
Order intake: $242 million
Operating profit: $15.5 million
Main products: Alternate mission equipment, composite structures, power systems and electronics, satellite simulators, electronic warfare management systems, self-protection solutions, mission support systems, ballistic missile defense solutions, force protection, radar electronics, tactical communication.