Orbital moves in next to their biggest US drone customer

Drone engine maker Orbital has set up shop in the US, across the river from their biggest customer.

The Perth-based business (ASX:OEC) has leased a section on the Hood River in Oregon from where it plans to fully launch itself into the US tactical drone market.

On the other bank is Insitu, a subsidiary of Boeing which makes the drones themselves and is the customer that helped to turn Orbital around in 2014.

Orbital could only be closer to their favourite US client if they moved in. Pic: Orbital

Orbital designed the N20 drone engine for Insitu, which is used in the US military’s ScanEagle drones.

It beat 40 global engine makers for a contract worth a minimum order value of $US33 million ($44 million) and a maximum of $US91 million ($120 million).

This year it won another $800,000 engineering contract with Insitu.

The first Insitu contract came in the middle of restructuring the business, settling (and starting) patent and legal disputes, selling off non-performing parts of the company.

It acquired a remote system operation system called REMSAFE in 2016 and refocused on engines and propulsion systems for unmanned aerial vehicles (UAVs), otherwise known as drones.

The company said in 2016 it was back on track to sustainable profits, but made a $12.5 million loss in 2017 because of delays in the drone program and lower than expected sales of REMSAFE hardware.

In October the new managing director and CEO, Todd Alder, said the company’s future lay in the supply of precision engines, fuel systems and integrated components to the tactical drone market.

“Tactical drones operate at altitudes of 18,000ft, fly for periods of 12+ hours, support land and sea based missions and are valued from $US500,000 – $US4 million. The propulsion systems powering these high value unmanned air vehicles (UAV) include not only the engine, but sophisticated fuel storage and supply systems, electrical supply systems and advanced carbon fuselage components.,” he said.

Orbital had been looking for the right piece of land in the US where it could build a factory for over 12 months.

“The Northwest is known as the centre of excellence for UAV, aerospace and defence in the US, so it was important to expand our footprint there and be able to tap into the wealth of expertise that exists in the region,” Mr Alder told Stockhead.

“With the US expecting to dominate the UAV market, we’ve aligned our growth strategy accordingly. This means having a geographical presence to be able capitalise on business acquisitions and new market opportunities, while collaborating closer with our customers.”

It will build a new factory on the site, which they have under a five year lease, and they expect to be finished by February and ready for UAV engine assembly and overhauls in the first half.

Orbital shares bounced 8 per cent late on Friday, but were unchanged in morning trade on Monday at 46.5c.