The company has laid the foundation for a material uplift in revenues into the 2023 financial year.

Over the last 18-24 months, advanced engine manufacturer Orbital Corp (ASX:OEC) has been steadily building a global pipeline of tier-one global defence clients.

And the company announced a key operational update this morning, successfully executing on the delivery of the second engine to its major Singapore customer for further evaluation.

The delivery marks a continuation of a three-phase development plan that Orbital outlined in its MoU (Memorandum of Understanding) with the Singapore customer when the deal was first announced to the market in 2020.


Strategy execution

As part of Phase 2, Orbital announced it would build and develop a number of engine prototypes.

The first engine system was delivered in June, with a third engine system scheduled for delivery later in 2021.

As Orbital continues to execute on its manufacturing targets, the company continues to work with its Singapore client on the implementation of Phase 3, which will see initiation of the first production run order.

Commenting on the update, Orbital CEO Todd Alder said it marks another step in the company’s ability to meet production targets for its global client base.

Orbital is the primary engine supplier to Boeing’s defence subsidiary Insitu, and has a separate agreement with global aerospace giant Textron.

“This program represents an exciting opportunity to develop and commission another world class engine production line from our operations in Australia,” Alder said.

“We look forward to providing further updates on this program and others over the next 12 months, as we target bringing additional engine models into production.”


Global outlook

The Singapore update follows on from the release of Orbital’s full-year results last week, where it confirmed annual revenues of more than $31m with positive EBITDA of $1.2m.

In commentary accompanying the results, Alder said that having established itself as a leading engine manufacturer globally for unmanned aerial vehicles (UAV), the business has been taking the necessary steps to diversify its customer base and revenue streams.

In establishing that foundation, Orbital will move from a two-engine production line to a five-engine production line over the next 12 months.

Alder said the company is now positioned to convert production development into material revenue growth early in FY23.

“The growing defence market presents additional Tier 1 opportunities, both globally and here in Australia,” Alder said.

As part of its exclusive five-engine supply deal with Insitu, OEC will bring its third engine into production this year before development commences on the fourth engine.

Production capacity for both Textron and OEC’s Singapore customer has also been commissioned and will be ready to commence in early FY23.

And as a leading global manufacturer for advanced UAV engines, the company is also positioned to capitalise from ongoing tailwinds in military defence spending.

In Australia alone, total spending over the next 10 years is expected to be around $575 billion, of which $270 billion is on new programs and equipment.

“With Orbital’s unique capabilities and our global reputation within the growing UAV market, we believe that the company is well positioned to capitalise on this forecasted growth,” Alder said.

This article was developed in collaboration with Orbital Corp, a Stockhead advertiser at the time of publishing.

 This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.